El Paso Corp & SEC settle charges alleging inflated oil/gas reserve estimates

[Dover]

July 11, 2008, 1:17PM
El Paso Corp. settles with SEC in reserves report case


By TOM FOWLER
Houston Chronicle Copyright 2008

El Paso Corp. has settled federal civil charges alleging it inflated oil and gas reserves estimates in ways that made company financial statements misleading to investors.

The Securities and Exchange Commission filed the charges and notice of the settlement in Houston today, saying the pipeline and exploration company and five former employees committed fraud when they reported the reserves improperly.

According to the complaint, El Paso's former employees "lacked required supporting data in estimating reserves and ignored negative drilling results and production trends demonstrating that some fields weren't producing as projected."

Without admitting or denying guilt, El Paso and the former employees accepted permanent injunctions against future violations of antifraud and other provisions of the federal securities laws. The five former workers also agreed to fines ranging from $40,000 to $75,000.

El Paso first notified the SEC and investors of errors in its reserves reports in 2004 and began its own investigation. Eventually the company restated its financials from 1999 through the first nine months of 2003 because of the inaccuracies, cut its reported reserves by 35 percent and took a $1.7 billion charge against equity...cont'd

http://www.chron.com/disp/story.mpl/business/5883295.html